Jacobs Engineering Rises After Buying Aker Unit

Jacobs Engineering Group Inc., the third-largest listed U.S. engineering company, rose the most in more than six months after agreeing to buy a unit of Aker Solutions ASA for about $675 million.

The purchase of Oslo-based Aker’s Process and Construction unit will expand Jacobs’ metals and mining businesses. It will also extend the company’s global reach, adding South America as a new market and boosting operations in China, the company said in a statement yesterday after markets closed.

The transaction offers “reasonable margins, bottom of cycle, strong mining exposure and a platform to take share in power and in Asia,” areas in which Jacobs had been “underrepresented,” Michael Dudas, an analyst with Jefferies & Co. in New York, said in a note today. He has a “buy” recommendation on the shares.

The Aker business has an estimated backlog of $1.55 billion, while revenue in the past nine months totaled almost $1.1 billion, Dudas said. Profit margins ranged from 6.7 percent to 5.3 percent from the third quarter of 2009 through the second quarter this year, he said.

Jacobs, based in Pasadena, California, advanced $2.17, or 4.9 percent, to $46.32 at 4:15 p.m. in New York Stock Exchange composite trading, the largest gain since June 2. Jacobs was the third-biggest gainer on the Standard & Poor’s 500 Index. Aker rose 2 percent to 142.5 kroner in Oslo.

Diversifying Services

Jacobs revenue declined from a year ago in the last six quarters as construction continues to slump in the U.S. Revenue for fiscal year 2010 ended Oct. 1, fell 14 percent to $9.92 billion from last year.

“This acquisition allows us to further diversify our services and drive greater growth in our business,” Chief Executive Officer Craig Martin said in the statement.

Aker has been trying to sell the Process and Construction business and was considering listing the unit, Frederik Lunde, an analyst at Oslo-based Carnegie ASA, said in a note.

“We believe a straight sales to be preferred, and as such this is a positive surprise,” Lunde, who has an “outperform” rating on Aker, said.

The transaction is scheduled to be concluded in the second quarter of fiscal 2011 and is expected to be “modestly accretive” to earnings in 2011, Jacobs said.

To contact the reporter on this story: Thomas Black in Monterrey at tblack@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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